April 8, 2018
The Michigan Legislature was on spring break beginning March 23 through April 9, but there was still plenty of political news to report since my March 11 Capitol News.
Flint Crisis — The Governor recently announced an end to free bottled water for Flint residents to sharp rebukes from area lawmakers and local officials. The city’s water is now testing below the federal action level for lead for over 18 months. According to the state, a total of $350 million in state money has been directed to Flint as a result of the water crisis beginning in 2014 along with $100 million in federal funds.
MSU/Nassar Crisis — The Michigan House Appropriations Higher Education Subcommittee and the House Law and Justice Committee issued their findings into Michigan State University’s handling of sexual assault complaints filed against former physician Larry Nassar which were so alarming that they were forwarded to law enforcement for further investigation. The Senate has passed a 10-bill package to tighten up child abuse and sexual assault laws; both the House and Senate Appropriations Committees will present the Governor with MSU funding and policy changes.
FREE CREDIT FREEZE ACT
Governor Snyder signed a bill that is good news for consumers interested in protecting their credit from fraud and abuse. On March 19, the Governor signed into law PA 76 (HB 5094) that amends Michigan’s Security Freeze Act to prohibit a consumer credit reporting agency from charging any fee for placing, temporarily lifting, or removing a security freeze for a Michigan consumer. The law becomes effective June 17, 2018. Currently the consumer credit reporting agencies (Experian, Transunion, and Equifax) can charge up to $10 for each of those three transactions unless identity theft is reported to the police.
While a freeze is in place, the consumer reporting agency may not release the consumer’s credit report or any information from it without the consumer’s express permission. A consumer may have his or her security freeze temporarily lifted, and a consumer reporting agency must remove the freeze at the request of the consumer or his or her authorized representative.
To freeze your credit to prevent potential thieves from using your stolen personal information to open fraudulent credit accounts, loans and services using your credit history, you can begin at www.annualcreditreport.com to learn about the process. You will need to request a freeze with each of the three credit reporting companies on-line or by mail (not telephone). If you place a security freeze on your credit report, businesses will not be able to obtain a copy of your report in connection with any new applications for credit. Before you apply for new credit, you will need to temporarily lift the security freeze following the procedures from the credit reporting company where you placed the freeze.
Federal law allows you to get a free copy of your credit report every 12 months from each credit reporting company.
ANNUITY BILL MOVES
On March 21, the Michigan House approved by a vote of 71 to 31, HB 5231, which would amend the State Employees’ Retirement Act to provide annuity options for employees and retirees who are in the defined contribution (DC, 401(k)-style) retirement plans provided through the State Employees Retirement System (SERS). Another bill, HB 5230, does the same for the Michigan Public School Employees Retirement System.
The bill would require that two or more annuity provider(s) must be chosen through a competitive bid process. The bidders would be required to meet performance standards specified in the bill. A floor substitute bill added the provision that the Michigan Department of Treasury could choose to offer only one annuitant provider after completion of the bidding process. The bill has been referred to the Senate Finance Committee for further consideration.
Currently state employees or retirees can approach any financial services company to purchase an annuity such as the SERA Plus program run by Hantz Group or 401(k) record keeper Voya. Michigan SERA favors the concept of offering more competition and potentially better products if the regulatory scheme properly protects state employees and retirees. We are aware that sale of annuities is a lucrative market and getting exclusive rights to sell them to state employees and retirees would be a big advantage for a financial services company. Once a financial services company sells a customer one product, the customer would be more likely to use the financial services company for other financial products.
ACTUARIAL TABLE STANDARDS
The Michigan House has passed almost unanimously HB 5653 which would amend the State Employees’ Retirement Act to align the actuarial assumptions used to calculate certain optional pension benefits with those currently used by the actuary. A similar bill, HB 5652, would do the same for the Judicial Retirement System. Identical changes were made to the actuarial equivalent benefit options under the Michigan Public School Employees Retirement System (MPSERS) in 2017 (PA 92 of 2017). The bills have been referred to the Senate Finance Committee for further consideration.
Currently, rather than taking a regular retirement allowance until his or her death, a state employee in the defined benefit pension plan may choose an actuarially equivalent benefit paid as follows:
The SERS statute requires that the actuarially equivalent benefit is calculated using an 8% assumed interest rate with a 1983 group annuity and mortality table. The bill would revise the assumptions used to calculate the actuarial equivalent to an interest rate determined by the Director of the Department of Technology, Management, and Budget (DTMB) and the State Retirement System Board in consultation with the actuary using mortality tables adopted by DTMB. The bill would allow more flexibility and accuracy to provide an actuarially neutral benefit as those assumptions continue to change over time.
AUTO INSURANCE TO INCREASE
The Michigan Catastrophic Claims Association announced March 15 that the assessment paid by auto insurance companies (and therefore Michigan drivers) would be increased by $22 per vehicle for the period of July 1, 2018, through June 30, 2019.
This increase brings the fee to $192 per insured vehicle and is a 13 percent increase over the 2017-18 assessment of $170. According to the MCCA, the increase is because of larger than expected claim costs but there was some offset by better than expected investment performance.
Under the updated rate, $161 will go toward anticipated new claims and expenses while the remaining $31 is for addressing the estimated $2.3 billion deficit from existing claims. During 2017, a total of about $1.2 billion in claims were paid out for catastrophic injuries. Catastrophic injuries are those costing auto insurance companies in excess of $555,000 per claim. The MCCA says the majority of catastrophic claims come from brain, spinal cord, fractures, back and neck injuries.
Michigan’s auto no-fault insurance law mandates lifetime medical and support care for those injured in auto accidents and thus we have the most expensive auto insurance rates in the country.
FOIA REQUEST FOR STATE PENSION AMOUNTS
Every State of Michigan retiree was notified by email or regular mail in late March that the Office of Retirement Services had released to the organization American Transparency SOM retiree names and the monthly amount of our pensions as requested under Michigan’s Freedom of Information Act.
American Transparency’s stated mission is “Every Dime, On Time, On-Line.” Its purpose is to capture and post all disclosed spending at every level of government and it claims that it has posted nearly 4 billion public expenditures from all 50 states including budgets, employee and contractor compensation, and retiree payments. It features itself a government watchdog organization. It is a 501(c)3 nonprofit, nonpartisan charitable organization with contributions exceeding $1 million in 2015.
American Transparency runs a Website www.openthebooks.com where public expenditure records are published. Adam Andrzejewski, a 2010 Republican candidate for Governor of Illinois, is the founder and CEO of OpenTheBooks.com. On that Web site you will find data for SOM retirees for 2014, 2015, and 2016. Although American Transparency requested retirement date, hire date (or pension start date), and last employer zip code, those items were apparently not provided by ORS. What is published is year (2014, 2015 or 2016), Area of Government (State Employees Retirement System), Employer Name (State of Michigan not our department of last employment), our name (last name, first name, middle initial), monthly pension amount, and the zip code of 48933 (ORS zip code rather than the zip code of our last departmental employer). Job title is a column heading but blank, apparently because ORS did not provide the information either because it did not have the information or felt that it was protected from disclosure.
On the Open the Books Web site, it provides a letter dated March 28, 2018 titled Answers to Common Questions Regarding our Michigan Office of Retirement Services Freedom of Information Act Request. It explains that each year, it files approximately 90,000 Freedom of Information Act (FOIA) requests at the Federal, State and Local levels of government across America. Its open records request to the Michigan Office of Retirement Systems was just one of these filings. It says that “Even if there is a mix of public and private dollars contributed to a public pension, taxpayers are guaranteeing the entire formula. The people of Michigan deserve to see the granular details of who’s receiving what, when and after how long. It’s the only fair way to debate taxpayer-guaranteed job benefits.” It goes on to say that “Having public employee and retiree names is crucial to thorough oversight — including who received what from which government employer.” It gives three examples of alleged pension malfeasance from Illinois to prove its point.
The Michigan SERA Coordinating Council Executive Committee at its April 6 meeting discussed the FOIA request and ORS release of our names and pension amounts. Some SERA members have complained that the release of the information is an invasion of our privacy. There are 30 exemptions to disclosure, but our SOM retiree names and pension amounts are not among the exemptions. ORS, upon advice of the Attorney General’s Office, was compelled to disclose the information or face a likely lawsuit.
The Board of State Canvassers has still not approved the signed petitions for prevailing wage, marijuana legalization, or the independent redistricting commission ballot proposals it has under review.
The ballot effort to constitutionalize voting rights in Michigan endorsed by Michigan SERA is reporting over 50,000 voter signatures gathered toward their 400,000 goal in its first month of operations. Meanwhile the effort to put an initiated law on the ballot to increase the renewable energy standard to 18 percent by 2022, 21 percent by 2024, 24 percent by 2026, 27 percent by 2028 and 30 percent by 2030 is actively gathering signatures. According to the National Conference of State Legislatures, 19 states have higher renewable energy portfolio standards and goals than Michigan. Several others are similar to Michigan’s. Consumers and DTE oppose the effort and spent millions to fight a similar 2012 renewable energy proposal.
The part-time legislature ballot proposal first backed by Lt. Governor Brian Calley has stalled out at 300,000 signatures and is apparently suspending the effort to get on the 2018 ballot.
SERA Recent News — If you are a SERA member, you are eligible to receive SERA Recent News, a periodic e-mail about breaking news and links to media stories of interest to state employees and retirees. Write to email@example.com, giving your name, email address, and chapter name.
Editor’s note: Mary Pollock is the Lansing SERA Chapter and SERA Council’s Legislative Representative. She may be contacted at 1200 Prescott Drive, East Lansing, MI 48823-2446; Phone 517-351-7292; E-mail firstname.lastname@example.org.
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